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The new gold rush

In a country halfway around the world, wheat harvest is under way. Enormous fields meander along a rolling farm landscape that stretches for miles. Flat-topped hills sit in the distance, highlighting why this area is called the steppe region of central Asia. It is part of a country called Kazakhstan.

Most American farmers have not heard of Kazakhstan, but eventually they will. With its massive wheat harvest, Kazakhstan is quickly joining the global era. John Deere and Case IH combines weave through its fields next to Russian combines. Grain is unloaded into U.S.-manufactured Balzer grain carts for immediate electronic weighing. Farm managers travel to the U.S. for training on the equipment and instruction in crop production.

The second-largest crop farmer in the world leases some of the expansive fields in this beautiful grassland. Nurlan Tleubayev farms 1.995 million acres in Kazakhstan. His leases on the land extend for 49 years. They are from former collective workers who farmed it when the country was part of the Soviet Union. Kazakhstan became its own country in 1991, and at that time capitalism was a seed just starting to grow. Entrepreneurs like Tleubayev grabbed hold of opportunity and ran with it.

The largest farm operation in the world also is in Kazakhstan. The farmer who owns this operation is Russian and splits his farm of an estimated 2.5 million acres between the two countries.

How fortunate for Tleubayev and his global neighbor that wheat prices have skyrocketed. And how fortunate for European and American companies that sell equipment, seed and chemicals that these new customers are available.

Asian gold rush

Tleubayev says that he recently committed $78 million in orders for U.S. and Canadian farm equipment for this year. He can take advantage of the high wheat prices to invest in new equipment for his Kazakhstan fields. This area along with Russia and other former Soviet countries are all behind the technology curve compared to Europe and the United States. But now they have the money to upgrade. As a result, these booming ag economies are referred to as the new gold rush.

But Kazakhstan's agricultural business hasn't been golden until recently. The country desperately struggled to farm even a third of the land that was farmed when Russia was in charge. After Soviet control ended, the acres farmed dropped dramatically — from 74 million in 1991 to 24 million in 1998.

“It was a terrible situation for agriculture in Kazakhstan,” Tleubayev recalls. But he was in the right place at the right time. Born in a small village, he grew up farming with his father and seven siblings on a collective farm. After serving in the Soviet military, he went to a university. Just as he graduated, Soviet rule ended and he started his own business buying farm companies in bankruptcy. He also bought and sold grain. By 1999, he had nearly 100,000 acres of land.

“When I started, it was just the production of grain,” Tleubayev relates. “Then I had a problem because I had no place to keep the grain. So now I have 16 grain elevators where I can keep 2 million tons of grain. In order to export grain, I had to find new markets like Africa, Egypt, Italy and Greece. Now I have a terminal that I bought on the Black Sea to serve the whole world.” He also started companies to manage all the pieces of his businesses, like insurance, inspections, leasing, elevators and even fuel.

Tleubayev is referred to as “The King” in Kazakhstan. He is president of a grain union and says he has had to become a specialist in nearly every area of agriculture. “Many people come to me to ask advice and I cannot make mistakes,” he says. He is clearly a driven man who has his sights set on farming a total of 2.9 million acres. Then, he says, he will stop. But it's doubtful he will stop building other businesses. Not long ago, he started a construction company in the country's new capital Astana to even out his cash flow. The construction company now posts $100 million in annual sales and is one of the five largest companies in the city.

Local growth

The incredible growth of Tleubayev's businesses has helped inject economic life into farm communities that for years struggled financially. He leases the land and then hires local people to manage and farm it for him. Vladimir Kazarkin is one of those employees. He is director of a 50,000-acre farm where he worked when it was a collective for the Soviets.

“When I started here, agriculture started growing because it brought new technology and it brought new life,” Kazarkin says. Instead of relying only on Russian equipment that was less efficient and required frequent maintenance, the farm now uses John Deere and Case IH combines, tractors and seeders.

Tleubayev's inventory of working equipment needed to farm his land includes 51 Deere, 72 Case IH and 298 Russian combines; 114 Balzer grain carts; 129 Deere and Case IH tractors and seeders; and 98 sprayers. “One John Deere combine is worth two Russian combines,” he states. Russian equipment companies are now buying components like transmissions and rear axles from Europe to improve the quality of their machines, but prices have increased as well, he adds.

Under private owners and managers, land productivity has improved. “For 36 years, wheat production was 1 ton/hectare. Since Kazakhstan became independent 16 years ago, harvest is now 1.1 tons/hectare [0.45 ton/acre],” Tleubayev says. In comparison, Canadian wheat harvest is 2.5 tons/hectare (1 ton/acre).

Low production costs and high wheat prices have bolstered Tleubayev's profitability. Based on September 2007 wheat prices, he was earning $46/acre profit for wheat. A year earlier, it was only $2/acre. The wheat land in Kazakhstan is located as far north as the U.S.-Canada border. Little fertilizer is used and virtually no pesticides. Every five years, land is rotated into a fallow period.

“Kazakhstan will never be a competitor to the U.S. or Canada because there is not enough wheat grown in the world,” Tleubayev says. “The production of wheat in the last 15 years has not increased.”

Upward track

Kazakhstan's grain production should grow in the future, especially with people like Tleubayev infusing capital into new technology and production. He expects the country will add another 17 million acres of grain production in the next several years.

Companies like John Deere that sell in this market are helping Kazakhstan's agriculture improve, too. Eurasia, John Deere's distributor in Kazakhstan, has trained 1,000 workers to operate tractors and combines. According to Eurasia's Mustafa Sahin, finding qualified workers is a big problem in the country. To help train its customers' employees, Eurasia holds several workshops, including a farm-vehicle driving school and a workshop on vehicle maintenance. The company also started pilot projects on six farms to demonstrate no-till, minimum-till and standard tillage methods.

Eurasia is building new office facilities in Kokshetau, a northern city located in the wheat fields. Included in its building plan is a new educational facility for training and a health clinic. Poor health is a problem, Sahin adds.

“We are pioneers here,” he says. “There are so many opportunities, but limited workers. That's why we're opening our own school.”

Although Tleubayev is Eurasia's largest customer, the company sells equipment to another 300 farmers in Kazakhstan. Sahin says most farmers in the wheat area farm between 12,000 and 170,000 acres.

While it has taken more than 15 years, Kazakhstan's agriculture industry is on an upward track. Farmers here have already bought all the John Deere equipment allotted to this country for 2008. And no doubt they have bought the number of machines allotted by the other U.S. equipment companies selling here.

Booming wheat prices have helped build the industry short term, but the country's good cropland, capitalistic society and tolerant population all make Kazakhstan fertile ground for steady growth. More U.S. equipment and products will end up in this largely unknown country. It is on its way to being a major producer of food for the world.

KAZAKHSTAN IN BRIEF

Size: Ninth largest country in the world, behind India (seventh) and Argentina (eighth)